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Contract
mainly discussed in Title II (Articles 1305-1422) of Book IV of the Civil Code of the Philippines. A contract is an agreement through meeting of the minds between two persons whereby one binds himself, with respect to the other, to give something or to render some service.Civil Code, Article 1305 It have the force of law between the parties and have been complied with in good faith.Civil Code, Article 1159 The term force of law in the definition refers to the legal aspect of an agreement as a contract. This means that you can go to court and ask for a civil action in case of non-compliance of the contract. Any agreement without the 'force of law' are not contracts but merely personal or social agreements. The term in good faith denotes fairness and honesty of intention in the performance of the contract, so as to not destroy or injure the right of one of the parties. It would not be in good faith, for instance, when one party has exempted himself from the contract while the other is still bound to it. A contract is one of the sources of obligation. An obligation is the juridical necessity that results when a contract is completed or perfected. There can be no contract if there is no obligation, though not all obligations arise from contracts. The obligation that arises from contracts is called conventional obligation. Characteristics of Contract The common characteristics of contracts are: * Obligatory - the force of law between the contracting parties compel them to perform under the threat of civil action or lawsuit. * Autonomy - such stipulations, clauses, terms and conditions are established by the contracting parties as they may deem convenient, provided they are not contrary to law, morals, good customs, public order, or public policy.Civil Code, Article 1306 * Mutuality - the bind must involve both of the parties,so that the validity or compliance of a contract cannot be left to the will of only one of them.Civil Code, Article 1308 * Relativity - the effectivity is only between the parties, their assigns and heirs, except in case where the rights and obligations arising from the contract are not transmissible by their nature, or by stipulation or by provision of law.Civil Code, Article 1311 * Consensuality - the mere consent that perfected the contract should bound the parties to the fulfillment of what has been expressly stipulated, and all the consequences which, according to their nature, may be in keeping with good faith, usage and law.Civil Code, Article 1315 However, real contracts, such as deposit, pledge and commodatum, are not perfected until the delivery of the object of the obligation.Civil Code, Article 1316 Elements of Contract A contract has the following essential elements: * Consent - a meeting of the minds between parties with respect to the object and cause; there is a certain offer by one party and there is an absolute acceptance by another party.Civil Code, Article 1319 * Object - the thing, right, or service to be provided or performed under the contract. * Cause (causa) - the essential purpose or reason for the contract: ** for onerous contracts, the promise of a thing or service by the other.Civil Code, Article 1350 ** for remuneratory contracts, the service or benefit which is being remunerated. ** for contracts of pure beneficence, the mere liberality of the benefactor. The contract will not be perfected unless the aforementioned elements or requisites concur.Civil Code, Article 1318 In addition, a contract also has: * Natural elements - those which are part of the contract even if the parties do not provide (stipulate) them, and is presumed by law to exists; such as a warranty of hidden defects or eviction in contract of sale. * Accidental elements - those which are established or stipulated in the contract by the contracting parties as they may deem convenient; such as stipulations, clauses, terms and conditions. Stages of Contract A contract undergoes three stages: * Preparatory or conception - process of formation through bargaining or negotiation, which begins from the time the prospective contracting parties manifest their interest in the contract that leads to the perfection of the contract. Either party may stop the process or withdraw an offer made. * Pefection or birth - process of arriving at a definite agreement or meeting of the minds as to the elements of the contract, particularly the essential ones (object and cause). * Consumption or death - the fulfillment of the respective obligations of the parties under the contract, resulting to its accomplishment and extinguishment. Form of Contract main article: Form of Contract The form of a contract is manifested by: * intent or will - its psychological existence; only conceptual and cannot have legal value. * expression of such intent or will - its physical or logical existence; substantial and can have legal value. A contract may be in the form of: * an oral agreement, or those that are partly oral and partly written, which are oral contract in legal effect.Manuel v. Rodriguez; G.R. No. L-13435 (1960) * a single written agreement signed by both parties, wherein all its terms are in writing, regardless if it is hand-written or electronically encoded/printed.Sec. 17, Republic Act No. 8792 (Electronic Commerce Act of 2000) * a written agreement with two copies; one signed by one party, the other signed by the other party. * a set of signed written agreements which are related and not contradictory. * a set of unsigned written agreements identified as part of the signed written agreements. * any formal written agreement/s: ** private instrument - has no acknowledgement from a notary public or any authorized official. ** public instrument - has acknowledgement from a notary public or any authorized official. A contract should also be in: * a form required by the law for its validity.Civil Code, Article 1356 * a form required by the law to be enforceable or be proved in a certain way. * a form required by the law for for the convenience of the parties or for the purpose of affecting third persons. Reformation of Contract main article: Reformation of Instruments A contract is reformed to order to amend or correct its form as a written instrument so that it would conform to the real intention of the parties.Civil Code, Article 1359 It is important to note that reformation does not change the contract, rather it aims to establish its real purpose as manifested by the real intention of the parties. The reformation of instrument requires: * a meeting of the minds of the parties. * a written instrument that does not express the real intention of the parties due to mistake, fraud, inequitable conduct, or accident; such real intention must always prevail. * a petition/request for the reformation of the instrument; this is in order for the facts to be put into legal proceeding. * a clear and convincing proof to support such petition. Interpretation of Contract main article: Interpretation of Contract A contract is interpreted in order to determine the meaning of the terms or words used in its contents and provisions (stipulations) that are ambiguous, not understood, and not obvious. The interpretation of contract has the following rules: * there is no need for interpretation if the terms of a contract are clear and leave no doubt upon the intention of the contracting parties.Civil Code, Article 1370 par. 1 * the evident intention of the parties shall prevail if there is a conflict between such intention and the words.Civil Code, Article 1370 par. 2 * the specific terms shall prevail if there is inconsistency or confusion over the uses of general terms covering the same subject matter.Civil Code, Article 1372 * the most adequate meaning shall prevail if some provisions have several meanings.Civil Code, Article 1373 * the interpretation of a contract as a whole shall prevail if there are various doughtful provisions in the entirety.Civil Code, Article 1374 * the most sensible meaning shall prevail if a word has multiple meanings; this is in keeping with the nature and object of the contract.Civil Code, Article 1375 * the usage or custom of the place shall prevail if the parties entered into their contract with reference to such usage or custom.Civil Code, Article 1376 * the interpretation of obscure terms or stipulations shall be against the party who caused the obscurity.Civil Code, Article 1377 * in case the above rules are unable to settle doubts, the supplementary rule shall resolved such doubts: ** in incidental circumstances of a gratuitous contract, the interpretation should be made which would result in the least transmission of rights and interests.Civil Code, Article 1378 ** in onerous contract, the interpretation should be in favor of the greatest reciprocity of interests. ** in object, the contract shall be null and void since the intention of the parties cannot be known. Classifications of Contract according to form: * Informal contract - in any form as long as all the requisites or essential elements for its validity are present. * Formal contract - in a form required by the law. according to the involvement of the parties: * Unilateral contract - one party is bound to fulfill an obligation for an act by another party. * Bilateral contract - both parties are bound to fulfill their mutual promises or respective obligation to each other reciprocally.Civil Code, Article 1191 according to name or designation: * Nominate contract - has specific name or designation in law; such as commodatum, lease, agency, and sale. * Innominate contract - has no specific name or designation in law; shall be regulated by the stipulations of the parties, by the Civil Code, by the rules governing the most analogous nominate contracts, and by the customs of the place.Civil Code, Article 1307 ** do ut facias (I give that you may do) ** facia ut des (I do that you may give) ** facio ut facias (I do that you may do) according to perfection: * Consensual contract - perfected by mere consent;Civil Code, Article 1315 such as the contract of sale, lease and agency. * Real contract - perfected by mere consent and the delivery of the object; such as deposit, pledge and commodatum. * Solemn contract - perfected through compliance with the form required by law; identical with formal contract. according to cause or purpose: * Onerous contract - the purpose is the performance of an obligation by one party as the other party performs or has performed its own obligation. * Remuneratory contract - the purpose is the remuneration or payment by one party for a service or benefit previously rendered by the other party. * Gratuitous contract - the purpose is the mere liberality or the feeling by one party that the other party (which is the benefactor/giver) has been generous; such as in free, pure donation. according to the obligatory force: * Valid contract - with such stipulations, clauses, terms and conditions that are not contrary to law, morals, good customs, public order, or public policy. * Rescissible contract - with legal validity, but may be rescinded or revoked in the cases established by law.Civil Code, Article 1380 * Voidable/Annullable contract - with legal validity but may be invalidated by a court action on the grounds of mistake, violence, intimidation, undue influence, fraud, or incapacity of one of the parties to give consent.Civil Code, Article 1390 * Unenforceable contract - with legal validity but cannot be enforce through court action by reason of defects, unless it is ratified according to law.Civil Code, Article 1403 * Void contract - with no validity at all because of certain defects, such as illegality; considered inexistent from the very beginning and cannot be ratified according to law.Civil Code, Article 1409 Resources General References: Websites: Citations: Category:Obligations and Contracts Category:Sources of Obligation